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How To Trade Trends Using Fibonacci?

Investors are continuously confounded by the puzzle as to when should they enter position in a trending market place.
If you enter too early, then you might run the risk of the stop getting hit prior to the trend continues its moment as you wish.
On the other hand, in case you enter too late, it is possible that you might guess, completely. This might result in disastrous results.

The below article discusses one of the most popular means that can help traders recognize suitable entry points while trading a trend. The below procedure can also help traders buy uptrends at the cheaper rates as well as sell downtrends at good rates.

The Right to Wait to Apply for Fibonacci:

Investors trying to apply for Fibonacci first need to find a trend which they are looking to trade. Like most other permutation of tech analysts, the longer period can typically offer a better degree of efficiency because of better sample sizes as well as the fact that more investors could be making identical observations. Hence, the very first step in applying for Fibonacci is recognizing the latest major move with which investor is looking to trade.

Now that the trend which the trader wishes to trade has been recognized, you can add Fibonacci retracement to the chart using the traderæŠ¯ charting program.

Understanding the Different Levels of Fibonacci Retracement:

The biggest feature of Fibonacci is a series of retracement levels which are provided as possible support & resistance.
The most common Fibonacci interval is connected to the Golden ratio (.618). Often, the Interval can be interpreted as 61.8 percent: hence from the trend which was only drawn ?61.8 percent up, the trend line can offer the price as possible level of resistance.

From 61.8 percent retracement levels, investors have taken reciprocal of golden-ratio 91-.618) in order to find next popular Fibonacci retracement level of around 38.2 percent.

The next 2 common levels will be 76.4 percent & its reciprocal, i.e., 23.6 percent.

Investors can also commonly plot 50 percent level ?even though that isnæŠ° a true Fibonacci number.

Not Every Level is Created Alike

Amongst the first things investors will notice whilst trading with Fibonacci is not every level will offer support/resistance at predefined intervals & rates.

So it is good for investors to wait till support & resistance are formed at such levels prior to trading them.

After resistance and support are formed, investors can consider trading in the direction of initial trend using stop loss manner just over the resistance (or beneath the support in case of an up-trend).

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